Note 6 – Stock-Based Compensation

Stock Incentive Plans

The Co-Diagnostics, Inc. 2015 Long Term Incentive Plan (the “Incentive Plan”) reserves an aggregate of 6,000,000 shares of common stock issuable upon the grant of awards under the Incentive Plan. The number of awards available for issuance under the Incentive Plan was 2,064,933 at September 30, 2021.

Stock Options

The following table summarizes option activity during the nine months ended September 30, 2021:

The total intrinsic value of options exercised during the nine months ended September 30, 2021 was approximately $1.3 million. The aggregate intrinsic value of outstanding options at September 30, 2021 was approximately $8.5 million.

Stock-based compensation cost is measured at the grant date based on the fair value of the award granted and recognized as expense over the vesting period using the straight-line method. The Company uses the Black-Scholes model to value options granted.

In January 2021, the Company modified the exercise price of 100,000 of the options from $16.49 to $9.30. Due to the modification, the Company will recognize incremental stock-based compensation cost of $65,000. Of this amount, the Company has recognized approximately $50,000 and the remaining will be recognized over the remaining service period.

As of September 30, 2021, there were 16,666 of unvested options and $119,897 of unrecognized stock-based compensation expense. The unrecognized stock-based compensation expense is expected to be recognized over 0.7 years.

Restricted Stock Units

The grant date fair value of RSUs granted is determined using the closing market price of the Company’s common stock on the grant date with the associated compensation expense amortized over the vesting period of the awards. The following table sets forth the outstanding RSUs and related activity for the nine months ended September 30, 2021:

As of September 30, 2021, there was approximately $13.5 million of unrecognized stock-based compensation expense related to outstanding RSUs which is expected to be recognized over a weighted-average period of 2.5 years.

Warrants

The Company has issued warrants related to past financings and as compensation to third parties for services provided. The Company estimates the fair value of issued warrants on the date of issuance as determined using a Black-Scholes pricing model. The Company amortizes the fair value of issued warrants using a vesting schedule based on the terms and conditions of each warrant if granted for services.

The following table summarizes warrant activity during the nine months ended September 30, 2021:

The aggregate intrinsic value of outstanding warrants at September 30, 2021 was approximately $553,000. All outstanding warrants are exercisable at September 30, 2021 and there was no unrecognized stock-based compensation expense related to warrants.

Stock Issued for Services

The Company has issued restricted stock to third parties for services provided. The grant date fair value of the restricted stock granted is determined using the closing market price of the Company’s common stock on the grant date with the associated compensation expense amortized over the vesting period of the stock awards. The Company has issued 5,548 shares of restricted stock for services during the nine months ended September 30, 2021 and there was no unrecognized stock-based compensation expense related to restricted stock issued.

Stock-Based Compensation Expense

The Company recognized stock-based compensation expense related to the types of awards discussed above as follows: